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Trump's Trade Adviser Accuses Germany of Exploiting Cheap Euro

What's the German for "currency manipulator"?

President
Donald Trump's top trade adviser accused Germany of using an
artificially cheap euro to gain an unfair advantage in world trade over
the U.S. as well as other countries in the EU, re-igniting a
long-festering argument over Europe's common currency. It also adds to
Trump's criticisms of German Chancellor Angela Merkel's policies on
refugees and defense, widening the fault lines between the Western
World's two most powerful countries.

In e-mailed responses to questions from the Financial Times, Peter
Navarro said Germany "continues to exploit other countries in the EU as
well as the U.S. with an ‘implicit Deutsche Mark’ that is grossly
undervalued."

The
comments will set alarm bells ringing in Berlin, reviving an argument
often levelled at it since the birth of the euro in 1999: namely, that
it has used the ballast of weaker countries in the euro zone to keep its
exchange rate at a level far below where it would otherwise be. That
gives exporters such as BMW and Siemens a crucial price advantage in
'stealing demand' from other countries like the U.S. or Japan. Germany
says the surpluses only reflect the actions of private companies and
citizens, rather than government policy.

In
recent months, the euro has traded at its lowest level against the
dollar in nearly 13 years, due to the fact that the European Central
Bank has kept monetary policy loose to prop up the likes of Greece,
Italy, and Portugal. That has made Germany's exports even cheaper.

Germany's
current account surplus, which includes services as well as trade in
goods, has soared ever higher in recent years, and is now larger than
China's in absolute terms. As a proportion of gross domestic product,
it's over three times as large as China's, according to IMF data. That
makes it, in some people's eyes, one of the biggest macroeconomic
imbalances in the world economy.

Elsewhere
in his interview, Navarro said that the skewing of effective national
exchange rates was one of the reasons he expected the mooted
comprehensive free trade deal between the U.S. and EU (the Transatlantic
Trade and Investment Partnership, or TTIP) to die a quiet death under
the new administration.

“Brexit
killed TTIP on both sides of the Atlantic even before the election of
Donald Trump," Navarro said, a nod to the fact that the U.K. had been
the only major EU country unambiguously in favor of the deal.

Navarro,
like Trump, believes that the U.S. has a better chance of improving its
foreign trade with bilateral deals, rather than with multilateral ones
like TTIP or the Trans-Pacific Partnership (from which Trump withdrew
the U.S. last week by executive order).

"I
personally view TTIP as a multilateral deal with many countries under
one ‘roof’,'" said Navarro. "The German structural imbalance in trade
with the rest of the EU and the U.S. underscores the economic
heterogeneity within the EU — ergo, this is a multilateral deal in
bilateral dress.”

Elsewhere
in his answers, Navarro repeated the rationale behind Trump's activist
approach to reshore more value-adding manufacturing jobs to the U.S.

“It
does the American economy no long-term good to only keep the big box
factories where we are now assembling ‘American’ products that are
composed primarily of foreign components,” he said. “We need to
manufacture those components in a robust domestic supply chain that will
spur job and wage growth.”

Navarro
also rejected the charge that U.S. consumers would end up bearing the
brunt of any tariffs imposed on imports in pursuit of that goal. He
called that notion “an old and tired argument the globalist wing of the
offshoring lobby has used for years to put Americans out of work and
depress wages by shipping our jobs offshore”.